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Halifax Health Settles Portion of Fraud Case Prior to Trial

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Halifax Health, a Florida-based medical facility, recently settled the first part of a multi-million dollar lawsuit alleging the company is guilty of inappropriately admitting patients, illegally billing Medicare, and illegally colluding with doctors. The exact amount of the settlement was undisclosed, but sources close to the case claim it was in the neighborhood of $85 million.

Halifax Health has been under investigation since 2009, when a whistleblower reported the illegal activity occurring at the medical centers owned by Halifax Health. The qui tam suit was brought against Elin Baklid-Kunz, then and currently working as the director of physician services for Halifax Health. The suit claims fraud had been occurring for more than a decade. Two years later, in 2011, the Department of Justice joined the case.

In an effort to make the complex case easier, the judge overseeing it agreed to have two separate trials. The first trial would focus on the bonus money paid to oncologists working at Halifax Health Medical Centers, as well as what was considered excessive payments to three of the staff neurosurgeons. Each of the neurosurgeons had been paid between $1 and $2 million annually. Though Halifax argues this is within the fair market value in the Daytona market, the government believes the payments were excessive and could indicate a problem. Furthermore, the government claims the false claims filed by these neurosurgeons exceed $37 million. The jury in the first trial would have determined if the hospital intentionally broke the law.

It is this first trial that was settled out of court, after Halifax and prosecutors agreed in principle the company would pay the settlement amount, as well as attorneys’ fees to resolve the allegations. The settlement was later approved by the judge. It was expected that potential damages and penalties in the case could exceed $1 billion, which would make it one of the largest Medicare fraud cases of its kind. Prior to the settlement, the government was seeking more than $400 million in the first trial.

This past November, the judge in the case ruled on the portion of the suit that alleged the contracts Halifax had with six oncologists was guilty of violating Stark Law. At minimum, Halifax would have been required to pay a $27 million penalty, which could have nearly tripled had the jury determined the hospital knew it was breaking the law. Additionally, the hospital would have been responsible for a payment of up to $11,000 per patient referred to the hospital under the False Claims Act.

Though the settlement likely saved Halifax millions of dollars, the second trial is still looming. Scheduled for July 2014, it will focus on the allegations related to admitting patients that did not need to be admitted. The charges assert the hospital had been unnecessarily admitting patients for more than a decade and billing Medicaid and Medicare (funded by taxpayers) for their care. Halifax could ultimately be responsible for an additional $400 million in damages, depending on the outcome of this second trial.

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